Following the passage of the draft UAE Anti-Commercial Fraud Law through the Federal National Council on 4 March 2014, further amendments have been made to the draft Law as it progresses towards enactment.
A number of these amendments will impact brand owners and their ability to enforce their rights in the UAE:
• Re-exportation: A major concern with the previous version of the draft Law was that it empowered the authorities to require importers to return counterfeit goods to their country of origin. This was a serious concern to brand owners because, following the re-exportation of counterfeit goods, it can be difficult to trace the goods (with the result that the goods end up back on the market instead of being seized and destroyed).
The latest version of the draft Law seeks to deal with this issue by distinguishing between Fraudulent and Corrupt Commodities (which may be re-exported) and Counterfeit Commodities (which must be destroyed). Accordingly, the question of whether a specific item should be re-exported or destroyed depends on whether it falls within the definition of a Fraudulent, Corrupt or Counterfeit Commodity.
However, the definitions of these commodities are not mutually exclusive. As a result, it is possible that goods which fall within the definition of Counterfeit Commodities, may also fall within the definition of Fraudulent and/or Corrupt Commodities. To avoid ambiguity, the draft Law could be amended further to clarify that Counterfeit Commodities cannot be re-exported, even if they also fall within the definitions of Fraudulent or Corrupt Commodities.
• Scope of draft Law: The definition of Counterfeit Commodities has been amended to include goods which bear a mark which is identical or similar to a registered trade mark. Previously this definition was limited to goods which feature a mark which is identical to a registered trade mark.
This extended definition is welcomed. However, even with this amendment, the draft Law is potentially narrower than the current Law in force, which seeks to protect against unfair competition by prohibiting traders from doing anything which causes confusion with competing trade marks, products or services (which could include unregistered trade marks and lookalike products).
It is hoped that the definition of Counterfeit Commodities will be extended further to enable action to be taken against the infringement of registered and unregistered trade marks. It also remains to be seen whether the draft Law will allow action to be taken against lookalike products.
The scope of the draft Law has also been extended to cover fraudulent activities in relation to the provision of goods and services. The UAE is a service-based economy and therefore this amendment should be well received by local brand owners.
There are other provisions of the draft Law which are also worth highlighting, including:
• Increased penalties: In certain cases, such as fraudulently dealing in pharmaceutical and food products, the draft Law provides that a fine of up to AED 1 million may be imposed together with two years imprisonment.
However, concerns remain about the penalties which may be imposed for dealing in counterfeit goods or services, which are limited to a maximum fine of AED 100,000 plus one year imprisonment (regardless of the scale of the fraudulent activity).
• Disclosure of books and records: The draft Law obliges infringers to disclose all information and documents relating to their dealings in fraudulent activities. The inclusion of this obligation may encourage the authorities not only to seize stocks of counterfeit goods, but also to obtain copies of information as to the source of the goods and the scale of the infringing activity.
• Cost of the destruction: Under the draft Law, the cost of destroying counterfeit goods is to be paid by the importer of the counterfeit goods. This is positive news for brand owners, in cases where the importer can be identified.
The next step is for the draft Law to be considered further at Ministerial level, with the possibility that additional changes may be introduced. After this, in order to be enacted, the draft Law will need to be signed into law and published in the Official Gazette.
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